Stock Name: KPJ
Company Name: KPJ HEALTHCARE BHD
Research House: RHB
KPJ Healthcare Bhd
(May 23, RM4.20)
Maintain outperform with fair value of RM4.94: Although KPJ Healthcare Bhd's 1QFY11 ended March 31 earnings of RM27.5 million (flat y-o-y; up 13.1% q-o-q) accounts for 20% of our and consensus full-year forecasts, we consider this in line.
We expect stronger earnings ahead following the contribution from the Sibu Medical Centre by 2HFY11 as well as the opening of its new 60-bed hospital in Bandar Baru Klang by 4QFY11.
Revenue in 1Q remained flat during the quarter. However, core earnings before interest and tax (Ebit) margin in 1Q saw an improvement of 1.1 percentage points q-o-q, which we believe was due to higher utilisation rate per patient.
Coupled with higher finance cost (+20.9% q-o-q), lower associate loss (-12.9% q-o-q) and higher minority interest (+5.5% q-o-q), partly offset by the lower effective tax rate of 23.9% (against 4QFY10's effective tax rate of 26.1%), 1QFY11 net profit grew 13.1% q-o-q.
KPJ declared a first interim gross dividend per share of 0.4 sen and a single-tier DPS of two sen (1QFY10: nil). This represents a net payout and net yield of 47% and 0.6%.
We project that KPJ will declare a total full-year gross DPS of 16 sen, which translates to a net payout and net yield of 46% and 2.9%.
We make no change to our FY11/13 earnings forecasts for now, which assume: (i) the opening of at least two new hospitals per year; (ii) 6% to 9% out-patient and in-patient growth per year; and (iii) three-year earnings per share compounded annual growth rate of 14.6%.
The risks to KPJ's earnings include lower than expected patient numbers, which could be due to slower than expected economic recovery and serious disease outbreaks (such as SARS or swine flu) in Malaysia as well as slower than expected turnaround in loss-making hospitals.
We maintain our fair value of RM4.94 per share, based on unchanged FY11 price-earnings ratio of 19 times (10% discount to regional peers average of 21.5 times to reflect the stock's relatively lower market capitalisation).
Given KPJ's leading position and expansion plans in Malaysia's growing healthcare market, we believe the stock's valuation discount to regional peers should continue to narrow. We maintain our 'outperform' call on the stock. ' RHB Research Institute, May 23
This article appeared in The Edge Financial Daily, May 24, 2011.
Company Name: KPJ HEALTHCARE BHD
Research House: RHB
KPJ Healthcare Bhd
(May 23, RM4.20)
Maintain outperform with fair value of RM4.94: Although KPJ Healthcare Bhd's 1QFY11 ended March 31 earnings of RM27.5 million (flat y-o-y; up 13.1% q-o-q) accounts for 20% of our and consensus full-year forecasts, we consider this in line.
We expect stronger earnings ahead following the contribution from the Sibu Medical Centre by 2HFY11 as well as the opening of its new 60-bed hospital in Bandar Baru Klang by 4QFY11.
Revenue in 1Q remained flat during the quarter. However, core earnings before interest and tax (Ebit) margin in 1Q saw an improvement of 1.1 percentage points q-o-q, which we believe was due to higher utilisation rate per patient.
Coupled with higher finance cost (+20.9% q-o-q), lower associate loss (-12.9% q-o-q) and higher minority interest (+5.5% q-o-q), partly offset by the lower effective tax rate of 23.9% (against 4QFY10's effective tax rate of 26.1%), 1QFY11 net profit grew 13.1% q-o-q.
KPJ declared a first interim gross dividend per share of 0.4 sen and a single-tier DPS of two sen (1QFY10: nil). This represents a net payout and net yield of 47% and 0.6%.
We project that KPJ will declare a total full-year gross DPS of 16 sen, which translates to a net payout and net yield of 46% and 2.9%.
We make no change to our FY11/13 earnings forecasts for now, which assume: (i) the opening of at least two new hospitals per year; (ii) 6% to 9% out-patient and in-patient growth per year; and (iii) three-year earnings per share compounded annual growth rate of 14.6%.
The risks to KPJ's earnings include lower than expected patient numbers, which could be due to slower than expected economic recovery and serious disease outbreaks (such as SARS or swine flu) in Malaysia as well as slower than expected turnaround in loss-making hospitals.
We maintain our fair value of RM4.94 per share, based on unchanged FY11 price-earnings ratio of 19 times (10% discount to regional peers average of 21.5 times to reflect the stock's relatively lower market capitalisation).
Given KPJ's leading position and expansion plans in Malaysia's growing healthcare market, we believe the stock's valuation discount to regional peers should continue to narrow. We maintain our 'outperform' call on the stock. ' RHB Research Institute, May 23
This article appeared in The Edge Financial Daily, May 24, 2011.
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